Category Archives: Finance

Guangzhou sees future in blockchain

The provincial capital is not often thought of as a financial center. It doesn’t have a stock exchange of its own, and financial services comprise less than one-tenth of GDP. This contrasts with Hong Kong and Shenzhen, where financial services contribute roughly twice as much (19%-20%) to GDP. Guangzhou, instead, has traditionally been known as an industrial powerhouse, dominated by state-owned enterprises in heavy industries and SMEs in export-oriented manufacturing.

Yet Guangzhou’s ambitions for developing financial services should not be underestimated. This is especially as the Nansha special economic zone is built out in the coming years (see our primer on Nansha, and its World Financial Island in Hengli). That is where a GBA International Bank is being built, and where a new Futures Exchange will be launched, initially trading carbon credits.  

Indeed, Guangzhou is showing that a city doesn’t need to have a stock exchange to make its financial sector go. And with the rise of fintech, it remains to be seen how the entire industry will be shaken up to the point where traditional financial institutions and trading platforms will matter less than they do now.

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Macau pushes for Nasdaq-style offshore RMB market

The central government is giving serious consideration to a formal proposal submitted by Macau to establish a new kind of stock exchange in the Special Administrative Region. Traded in the offshore Renminbi, stocks listed on this exchange would be heavily weighted toward technology companies, much like the Nasdaq board in New York, and the recently established STAR Market in Shanghai.

It looks like this new market is part of a broader move within the region, if not the rest of country, to embrace diverse means of raising equity for Chinese companies. At the same time, Guangdong is looking into establishing a market like Shanghai’s STAR Market, in Guangzhou. And it has also applied formally to establish a Commodity Futures Exchange, like the Chicago equivalent, in Guangzhou’s Nansha district.

Could this be the start of a major push to get more Guangdong-based companies into the hands of equity investors? It certainly seems so, and there is huge upside room to move on this: just 1.8% of Guangdong’s 45,000 National-Level technology firms are publicly listed. Moreover, the person who revealed the details is just the kind of official to make this clear – and public.

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CSRC to ‘fully support’ Shenzhen’s capital markets

The head of the country’s stock market regulatory agency says Shenzhen’s capital markets will continue to pursue reforms that aim to completely open it to the international investment community. Step by step. As soon as possible.

Observers who have been champing at the bit to see further opening of China’s capital market may be forgiven a yawn. At first glance, this sounds like the usual reassurances from a regulator that reforms are proceeding ASAP, when the reality is different. But Yi Huiman (above, left), head of the China Securities Regulatory Commission, was speaking to local media during an inspection tour of Shenzhen earlier this week. It was his first visit following the city’s designation as a Pioneering Zone for Socialism with Chinese Characteristics, and he was in the company of Shenzhen’s leader, Party Secretary Wang Weizhong (above, right), who is also Deputy Party Secretary of Guangdong.

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Shenzhen listed firms soar in 1H

Shenzhen’s publicly listed companies produced a stellar result in the first half of this year, with overall revenues up 12.17% and profits up 33.45%, significantly higher than the national average of listed companies.

Average return on equity reached 7.91%, which local media said was “higher than in recent years.”

The semi-annual report from the Shenzhen Securities Regulatory Bureau shows that 292 listed companies in Shenzhen have assets of RMB 25.96 trillion and net assets of RMB 3.83 trillion. These are ranked third behind Beijing and Shanghai, but their combined market cap of RMB 6.41 trillion ranks ahead of Shanghai, second to Beijing.

The net profit growth rate was 20 percentage points higher than the same period of last year. It compared with the national average for listed companies of 6.6%.

Read more.

HK stares at tourism abyss as funds keep flowing

Hong Kong remains China’s key gateway for foreign investment despite the protests, according to the latest data from Beijing. As SCMP reports, China received US$62.9 billion in foreign direct investment via Hong Kong in the first eight months of this year, accounting for 70 per cent of total inflows. The rise was even sharper once the monthly number for August was calculated: US$7.53 billion, up 29.2% from the same month last year.

It’s hard to blame or credit these flows on anything Hong Kong is doing, as Investment decisions into China are often months, if not years, in the planning. Still, the numbers might bring some comfort at a time when the tourism pillar of the economy is crumbling. 

According to this SCMP report, Causeway Bay is struggling, with one in ten shops standing empty and thousands of staff facing job losses. We think a very painful withdrawal experience lies ahead as the city is forced off the drug that it has been hooked on since 2003. Mainland tourists have other options, including Macau, and once mainland tariffs on imported goods start being completely repealed, they will likely have little reason to come back – even if the protests somehow start to subside.

Across the city, the hotel industry is reeling. But landlords appear to be doing what they do best: forcing management companies to let go of staff while they figure out the best way to reconvert the buildings into office space. And they are in the meantime looking to move their real-estate projects as fast as possible before prices start to fall off a cliff as the government strong-arms them into offering below-market discounts.

Hong Kong needs a big, new vision for its future.

HKMA chief unperturbed by short-sellers

After a weekend of chaotic scenes in Hong Kong, including fistfights between rival camps in the streets, Hong Kong’s outgoing monetary chief, Norman Chan, tried to present a picture of fortitude and calm to investors today. 

As SCMP reports Chan saying: “The financial market in Hong Kong is much bigger nowadays than at the time during the Asia financial crisis in 1998. The short sellers who want to attack the local currency would find they would need much more bullets to carry out the attacks, which would be too expensive for them to so. As such, the public does not need to worry about the short sellers’ attack to the peg as they would not be able to repeat what the short sellers were doing during the Asian financial crisis.”

He does have a decent argument. The Exchange Fund stands at HK$4.138 trillion (US$528.73 billion), 4.5 times more than the level at the end of 1998, when it was last attacked by speculators in the wake of the Asian Financial Crisis. He also says there is no evidence of a major movement of capital out of Hong Kong. 

However, one has to wonder why Chan is bothering to comment at all, if the government’s ammunition is so extensive that the public need not worry about it. While Chan says there have not been significant short positions taken against the HK dollar recently, is he seeing something he doesn’t like in the way local depositors are switching into US dollars? We will just have to wait and see.

Guangdong to launch its own STAR Market

Not usually one to play catch-up to Shanghai, Guangdong has announced it is getting its own Science and Technology Innovation Board, otherwise known as a STAR Market. 

Shanghai launched the first STAR Market on July 22. Its first day of trading made national headlines as share prices soared, but they came down in the subsequent days as traders locked in early profits. 

Now, it has been decided that Guangdong is following suit, under guidelines released by the central government earlier this year aimed at boosting innovation by making it easier for small and micro enterprises to raise equity on regional exchanges.

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Another GBA Innovation 100 ETF approved

The GBA Innovation 100 ETFs are piling up. Southern Asset Management became the only Shenzhen-based fund manager so far to be approved to launch an ETF based on the Greater Bay Area Innovation 100 Index. Another fund manager from Beijing was approved for the same type of ETF fund today, and the two follow GF Fund Management and ICBC-Credit Suisse Fund, which obtained their approvals earlier of the month. Another 10 are awaiting approval.

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Shenzhen Capital turns 20

Shenzhen Capital Group has just celebrated its 20th anniversary. With RMB347.2 billion of funds under management, the state-owned company, which comprises a diverse range of fund types, can boast a pretty impressive track record:

  • Invested RMB45.2 billion in 1,016 portfolio companies;
  • 151 of which have gone on to list on 16 capital markets worldwide;
  • Accounts for 12.4% of the value of all companies listed on A-share ChiNext; 
  • Compound annual growth rate of 20%.

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